Ruling coalition agrees to free up road revenues

The government and ruling coalition said Friday revenue from gasoline and other auto-related taxes will be freed up for purposes other than road construction from fiscal 2009, which starts next April.

The agreement is in line with the plan announced by Prime Minister Yasuo Fukuda in late March, when he tried to break the political deadlock before the provisional rates on the auto-related taxes expired on March 31.

By officially endorsing the plan, the Liberal Democratic Party-New Komeito ruling bloc now expects to get the Democratic Party of Japan-led opposition camp, which controls the Upper House, to come to the discussion table. The DPJ had refused to do so unless Fukuda’s plan was endorsed by the ruling parties and the government.

However, opposition leaders slammed the ruling bloc’s decision, saying it still assumes the extra rates on gasoline and other road-related taxes, which expired at the end of March, would be reinstated.

“We, the ruling bloc, have a political duty to the public,” Fukuda told coalition executives. “We need to boldly review what needs to be reviewed, but we should protect what we should protect.”

The ruling bloc, which aims to reinstate the special rates on road-related taxes that had been in place since the 1970s, now says it is willing to use some of the revenue on environmental problems and other purposes that local governments require.

The ruling bloc confirmed it will make sure local governments get necessary road construction funds and put in place measures to cover their revenue losses. Transport minister Tetsuzo Fuyushiba later told reporters, “Whether the revenue is specified exclusively for road construction, we still must have stable finances to build roads when necessary.”

Even with Friday’s decision, the ruling bloc and opposition remain split over the tax issue, with the DPJ demanding that the extra rates not be revived. DPJ Secretary General Yukio Hatoyama told reporters, “There is no way we can agree with an idea that is based on the premise that the extra tax rates would be reinstated.”

Since April 1, gasoline prices have fallen by about ¥25 per liter. However, the government argues this will cause a shortfall of ¥2.6 trillion for the central and local governments. The ruling bloc aims to push the prices back up with a second vote in the Lower House that will override the rejection of the Upper House.